PM Orbán: Higher wages and higher inflation could increase pensions

The Hungarian government are planning for higher minimum wages and higher inflation which could create room for increasing pensions, Prime Minister Viktor Orbán has said.

Prime Minister Orbán also stated that the planned minimum wage rise was conditional on an agreement between the government and employers.

In an interview to be broadcast on the M1 television channel this evening, PM Orbán said if the government’s talks are successful, pensions could be raised by 1.6 percent next year, rather than by 0.9 percent as earlier planned.

Last week, Mihály Varga, minister for National Economy, attended a meeting of the private sector and government permanent consultative forum. He proposed hiking the minimum wage of unskilled workers by 15 percent next year and a further 8 percent in 2018, while the minimum wage for skilled jobs could grow by 25 percent next year and by 12 percent in 2018. To offset these measures payroll taxes could be cut by 4 percentage points in 2017 then by 2 percentage points in 2018.

Ferenc Dávid, the chief secretary of business association VOSZ said after the meeting that they would rather see the cut in corporate tax rates “converted” into even lower payroll taxes. Dávid said if payroll taxes fall by 6 percentage points in 2017 they can support the proposed minimum wage raises targeted by the government.

He said lowering the corporate tax is a good gesture for foreign investors but would substantially affect only 1,000-1,100 companies in Hungary out of around 500,000.

Minister Varga said that the proposal put forward by employer representatives was a bit excessive considering risks to budgetary balance in the coming years. So far, no agreement has been reached and talks will continue next Tuesday, he added.